Monsanto Continues To Push Its Merger Proposal With Syngenta

Monsanto continued to push a merger with Syngenta and emphasized that the Swiss company does not have a “long-term vision plan” to create a value similar to its $45 billion offer.

Monsanto intensified its efforts to pursue a merger deal with Syngenta although its proposals have been rejected by the board of directors of the Swiss company. The management of the American company went to Europe and met the investors of Syngenta. It also boosted its public relations to the media as part of its effort to pressure Syngenta to continue the merger negotiations.

Monsanto remains ready to negotiate with Syngenta

Monsanto Chairman and CEO Hugh Grant said, “We’ve made a serious proposal at full and fair value that would provide their shareholders with a 43 percent premium and significant further upside potential through ownership in the combined company.”

“Monsanto remains ready to discuss with Syngenta a combination that would provide highly attractive returns to shareholders and would represent a transformational opportunity for global agriculture to meet the needs of farmers and broader society. The ball remains in their court,” added Mr. Grant.

Furthermore, Mr. Grant said Monsanto made a substantial commitment to address the regulatory issues raised by Syngenta. The board of directors of Syngenta believed that Monsanto’s proposal poses high antitrust risks.

Syngenta Chairman Michel Demaré previously stated that the legal counsels of the company engaged in discussions with their counterparts at Monsanto in three separates occasions, but they failed to provide resolutions to the regulatory issues.

Syngenta CEO said Monsanto offer was “woefully short”

In an interview with CNBC Europe, Syngenta CEO Michael Mack responded to Mr. Grant’s statement. He reiterated that Monsanto’s offer was “woefully short” and failed to do enough measures to give “further serious consideration” to the proposed merger.

“The regulatory risks are high and they are unaddressed with this proposal. The transaction risks are high. And that’s before looking at the underlying offer, which was completely inadequate,” said Mr. Mack.

Syngenta financial results

Syngenta reported its financial results for the first half of 2015. The company posted earnings of $14.70 per share, down from $15.60 per share in the same period last year.

The company sales declined 10% to $7.6 billion from $8.5 billion. Its operating income was $1.56 billion, down by 9%. Its EBITDA was $2 billion, down by 5%.

“In 2015 our industry has experienced continuing softness in crop prices and low farm incomes. Despite these challenges, and our decision to reduce sales of glyphosate, we achieved sales growth at constant exchange rates of three percent in the first half,” said Mr. Mack in a statement.

“We have been able to largely offset currency depreciation in emerging markets through determined price increases and this, together with our hedging program, has mitigated the impact of currencies on EBITDA,” he added.

Credit Suisse notes:

Implications on Monsanto Proposal: Syngenta’s result (slightly above market forecasts, reiterating guidance) is commendable vs peers and provides short term support. Monsanto’s current proposed bid (CHF449/share) implies FY15F EV/EBITDA of 14.8x (at FY15F guidance), a ~30% premium to two year averages. We believe a bid in the region of CHF480/share (we estimate still ~5% eps accretive for Monsanto, implied 15.8x EV/EBITDA) would be more financially acceptable to Syngenta shareholders.